REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

EN BANC

METRO PACIFIC
CORPORATION [now NEO CTA EB No. 1228
ORACLE HOLDINGS, INC.], (CTA CASE No. 8318)
Petitioner,
Present :

DEL ROSARIO, PJ
CASTANEDA, JR.
BAUTISTA,
- versus - UY,
CASANOVA,
FASON-VICTORINO,
MINDARO-GRULLA, and
RINGPIS-LIBAN, JJ.
COMMISSIONER OF
INTERNAL REVENUE, Promulgated:
Respondent.
OCT 18 2016 3.'3~/C ~.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - --¥----x
RESOLUTION

Fa bon- Victorino, J.:

On May 4, 2016, the Court En Bane denied the Petition

for Review dated October 21, 2014 filed by petitioner and
sustained the findi~g of the Court in Division in its Decision
dated June 11, 2014 and Resolution dated September 16,
2014 that petitioner is liable for deficiency donor's tax.

·'
Aggrieved, petitioner filed the instant Motion for
Reconsideration dated May 24, 2016, praying to reverse the
adverse Decision of May 4, 2016.

Petitioner argues that contrary to the Court's ruling, it

did not make any admission in its CGT Return that the
market value
Holdings, Inc.
of the shares of stocks sold to Columbus
(CHI) was P332. 78. Allegedly, the figure
j
Resolution
CTA EB No. 1228
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indicated in Schedule I of its CGT Return was the book value

and not the fair market value of the subject shares of stocks.

While petitioner admits that Schedule I of the CGT

Return provides a column for "Taxable Base" "Selling Price
or FMV whichever is higher", it counters that such terms
were p9rt of the CGT form itself. Moreover, it consistently
questions the BIR's interpretation of Section 7(c.2.2.) of
Revenue Regulations (RR) No. 6-2008 and maintains that
the term fair market value in Section 100 of the National
Internal Revenue Code (NIRC), as amended, is equivalent to
book value.

Petitioner likewise takes exception to the ruling that it

should have first assailed the validity of RR No. 6-2008 and
Revenue Memorandum Circular (RMC) No. 25-2011 before
the Secretary of Finance before going to the Court for the
same purpose. Petitioner explains that it could not possibly
take the suggested action since RR No. 6-2008 was issued
two (2) years before it received the Notice for Informal
Conference citing the said BIR issuance as basis therefor. At
that time, there was no indication that respondent would use
the said issuance against it. That being the case, the logical
remedy was the present court action. Further, the rule on
exhaustion of administrative remedies does not apply when
the issue involved is purely a legal question, or when the
administrative action being assailed is patently illegal, or
when the exhaustion of administrative remedies would be
unreasonable, all of which are present in the instant case.

The same holds true with RMC No. 25-2011. Petitioner

claims that it received the said issuance only on July 11,
2011, hence, it was unreasonable to expect it to appeal it
with the Secretary of Finance within 30 days after the date
of issuance on March 2, 2011 as provided in RMC No. 44-
2001. Besides, RMC No. 44-2001 applies only to BIR rulings
and not to BIR issuances such as RMC 25-2011.

Further, the case of Philippine American Life and

General Insurance Company vs. The Secretary of Finance
and The Commissioner of Internal Revenue, 1 cited in the/

1
G.R. No. 210987, November 24, 2014
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CTA EB No. 1228
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assailed Decision is not a binding precedent as it pertains to

the validity of RR No. 6-2008 and RMC 25-11. The
discussion on the subject matter was only incidental and
should be deemed a mere obiter dictum.

Petitioner also reiterates that no donation as

contemplated under Section 100 of the NIRC occurred, as
the evidence presented show that the sale of the subject
shares was for adequate and full consideration, based on the
prevailing price at the time of the sale.

Petitioner was also able to prove that the subject sale,

being an ordinary business transaction negotiated in good
faith by unrelated parties for legitimate business purposes
without donative intent on the part of the transferor, does
not fall under Section 100 of the NIRC. Even assuming that
the subject sale of shares was for less than adequate
consideration, jurisprudence holds it could remain a bona
fide business purpose, and at arm's length without being
deemed a donation.

Further, that Section 7(c.2.2.) of RR No. 6-2008 is void

as it equates book value with fair market value, which is
contrary to Section 100 of the NIRC which pertains only to
fair market value. Also the determination of fair market
value is a judicial function, hence, beyond the authority of
an administrative body such as the BIR. Being void, Section
7(c.2.2.) of RR No. 6-2008 cannot be the basis of
respondent's assessment for donor's tax against petitioner.

Finally, RMC No. 25-2011 revoking BIR Ruling DA (DT-

065) 715-2009 is void for it denied petitioner the right to
due process as it was issued without according petitioner the
benefit of a hearing with notice.

By way of comment, respondent points out that the

arguments of petitioner are merely rehash of its arguments
in its Petition for Review which had been fully dealt with by
the Court in the assailed Decision.

Contrary to petitioner's asseveration, it made judicial /

admission in its CGT Return about the fair market value of
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CTA EB No. 1228
Page 4 of 6

the subject shares of stock. A simple mathematical

computation of the figures in the CGT Return would show
that the fair market value of the said shares was P332. 78
per share. Sans any showing that the same was made
through palpable mistake, the said admission is binding
upon petitioner.

Respondent is firm that the Court has no authority to

rule on the validity of Section 7(c.2.2) of RR No. 6-2008.
Under Section 1, Rule 63 of the 1997 Rules of Court, any
action assailing the validity of an administrative regulation
must be treated as one for declaratory relief and should be
lodged with the proper Regional Trial Court (RTC).
Republic Act (RA) No. 1125, as amended, confers upon the
CTA the jurisdiction to resolve tax disputes in general, but
not on matters questioning the validity of a law, rule or
regulation such as RR No. 6-2008.

Even assuming that the Court can rule on the validity of

RR No. 6-2008, still jurisdiction has not been acquired since
petitioner failed to exhaust administrative remedies in
assailing the said administrative issuance.

As to RMC No. 25-2011, the same correctly revoked

BIR Ruling DA (DT-065) 715-2009 dated November 27,
2009 since the latter ruling is void and in contravention of
the law it was supposed to interpret.

BIR Ruling DA (DT-065) 715-2009 is a ruling of first

impression, or one without established precedents, the
issuance of which could not be delegated by respondent. In
fine, BIR Ruling DA (DT -065) 715-2009 was invalidly issued
by a mere Assistant Commissioner in violation of Section 7
of the NIRC, as amended. Further, it granted an exemption
not provided in Section 100 of the NIRC, the law it sought to
interpret.

Even assuming that BIR Ruling DA (DT-065) 715-2009

was validly issued, it had already been revoked by RMC No.
25-2011. Moreover, RMC No. 25-2011 could be given
retroactive effect by virtue of petitioner's misrepresentation
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CTA EB No. 1228
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of the facts upon which the issuance of BIR Ruling DA (DT-

065) 715-2009 was based.

Lastly, the questions on the validity of RMC No. 25-

2011 were deemed waived when petitioner failed to exhaust
administrative remedies in assailing the said issuance.

Evidently, and the Court agrees with respondent that

the arguments in petitioner's Motion for Reconsideration are
mere rehash of those in its Petition for Review, which have
already been addressed in full and rejected in the assailed
Decision dated May 4, 2016. Significantly, petitioner's
contentions were not supported by evidence on record upon
which the Court based its ruling. There being no new matter
raised which warrants modification, much less reversal of
the assailed Decision, petitioner's bid for reconsideration
should be denied.

WHEREFORE, petitioner's Motion For Reconsideration

dated May 24, 2016 is hereby DENIED, for lack of merit.

SO ORDERED.

We Concur:

Presiding Justice

~~-~ c. Cl.d'-~~ Jc;9,·

JtJANITO C. CASTANEDA:, JR. LOVELL R(sAUTISTA
Associate Justice Associate Justice
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CTA EB No. 1228
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ER~P. UY CAESAR~ASANOVA
Associate Justice
Associate Justice

Ctitt,N. M~~,C~ ~. ~ J- "-

CIELITO N. MINDARO-GRULLA MA. BELEN M. RINGPIS-LIBAN
Associate Justice Associate Justice